Are Americans falling out of love with loyalty programmes?

Price and convenience are trumping mindless devotion to an airline, a car rental company or a hotel,” observed travel writer and columnist Christopher Elliott. “Consumers in the past have been willing to endure the fine print and shifting goal posts that have defined most travel loyalty programmes,” wrote Elliot. “They’ve looked the other way while rules were quietly rewritten and their points expired, hopeful that they would someday get a ‘free’ award ticket. But the latest reforms by such legacy airlines as Delta and United (both major US air carriers), which tied rewards to the amount that travellers spend rather than the number of points they earn, was a pill too hard to swallow.”

He went on to quote several instances of corporate and other frequent travellers who were dissatisfied, or had left, loyalty programmes. These included a customer of the La Quinta Inn & Suites hotel chain, who was dismayed to discover that he received no loyalty points if he found a discounted online rate. He accused staff of “splitting hairs” and cut up his loyalty card in front of them.

Also quoted in the article was Ray Advani, founder of a money management blog. “It’s as if American travellers are slowly waking up from a three-decade slumber and realising that the loyalty only ever went one way. I’ve decided to focus on the actual prices rather than the rewards programme when spending,” he said.

For his part, Elliot noted that this attitude change might be a positive. “If enough travellers can break the loyalty habit, then the corrosive effects of loyalty programmes on the travel industry could be reversed. People will spend because they see real value, not because they’re slaves to their gold cards and perks. In time, the division between ‘haves’ and ‘have-nots’ might even narrow – and perhaps all passengers will get decent service, regardless of the colour of their loyalty card.”

But a US-based survey of loyalty programmes released in April by the Boston Consulting Group noted that an increasing number of businesses are using loyalty strategies as part of their marketing activities. “As the competition for share of wallet – or shopping bag or household budget –intensifies, more consumer product and service companies are adding loyalty programmes to their marketing mix … and customers are signing up,” the researchers said. “The number of rewards programmes jumped 27% from 2010 through [to] 2012. Membership has soared as well. The average US household has 22 loyalty programme memberships and actively uses 10. Some companies generate up to 60% of their revenues from loyalty programme members.”

Boston said businesses involved in such strategies should bear three fundamentals in mind: the best programmes are those that are tightly integrated with broader brand and marketing strategies; a programme’s economic value depends on increasing the loyalty margin and the incremental share; and such strategies can complement the brand experience, but they cannot substitute for it. “The companies that follow these precepts will turn their programmes into true competitive advantages. They will also find their bottom lines richly rewarded,” the study noted.

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